In search of ROI
IT INDUSTRY UPDATE
EFFECTIVE PORTFOLIO ANALYSIS, PMOs AND ENTERPRISE “VISIBILITY” HAVE RISEN TO PROMINENCE JUST WHEN THE INDUSTRY IS UNDER THE MOST PRESSURE TO JUSTIFY ITS EXPENDITURES.
BY DAVID E. ESSEX
Although project management tools and methodologies have transformed the information technology sector, IT has influenced project management as well. The field has served as an organizational proving ground for the project mindset while inventing new software and networking technologies to augment the analytical and collaborative power of project teams.
In the past half-decade, IT has needed project management more than ever, as economic pressures threatened technology investments and organizations became risk-averse, avoiding new markets and opportunities. Instead of innovating, IT kept daily operations running at status quo. “The reality now is that up to 75 to 80 percent of the spending in IT is coming on these non-capital expenses,” says Scott Hardey, senior vice president of worldwide customer service at PlanView Inc., an Austin, Texas, USA-based vendor of project and portfolio management software. “The money's been flat, dropping for five years,” he says. “There's really no fat in IT.”
→ Many departments have adopted an enterprise view of their projects, programs and portfolios in the past few years. But despite its proven advantages, IT project management still fights for cultural acceptance in many organizations. “It all depends on if the organization is willing to do all that it's going to take, because there is going to be pain,” says Marc C. Andiel, PMP, vice president, strategic business management for the Baylor Information Services, Baylor Health Care System in Dallas, Texas, USA. “Some projects will be cut. “To counteract the resistance that comes from within IT, project managers must focus on managing change. “I have always called myself a change advocate,” he says. “Success always depends on how long it takes the IT organization to embrace the change of project management.”
In the late 1990s, the notion of organizing projects into portfolios, and subjecting the portfolios to the same kind of cost/benefit analysis that historically had been applied to investment securities, became popular, especially for IT. Several vendors released portfolio management software with schedule and resource data gleaned from popular desktop tools such as Microsoft Project. Meanwhile, server-based enterprise project management (EPM) tools became available, taking a ground-up approach that allowed project managers to categorize projects in programs or portfolios and share their collective data over a network, sometimes applying minimal portfolio analysis.
→ With a long history of structured programming and operations research behind it, the IT industry was familiar with project management theories and has been quick to adopt its formal disciplines and software.
→ Portfolio analysis tools, which brought along business acumen, solid financials and a collaborative approach, have been keys to the recent success of project management in IT.
→ PMOs helped prove the value of both IT and project management to their organizations.
→ Recent demands for IT governance, performance measurement and business alignment are driving new demand for enterprisewide project portfolio management.
If project management has brought anything to IT, it's “visibility,” the industry's buzzword for anything that makes it easier for workers—especially managers— to see what is going on in their organizations. The top-down approach of portfolio management, if well-integrated with detailed, bottom-up project data, can help ensure that investments achieve business alignment. Portfolio management software from Pacific Edge and direct competitors such as Niku Corp. and ProSight Inc. contain tools for identifying business goals and evaluating project portfolios by their contributions toward those goals.
→ While portfolio management and EPM tools have brought the benefits of integration to some organizations, many IT managers say they still cannot get a single view of all their projects, the data for which often still reside in separate Excel spreadsheets, schedulers and time-sheet tools. “They say, ‘I can't see or control the projects—there's no visibility into what I'm doing,’” says Daniel Stang, principal analyst at Gartner Inc., the Stamford, Conn., USA-based IT market-research firm. “All they have is a loose collection of tools that are not connected in any way. What they need to see is [project] status. You could simplify a lot of that by letting them see centralized project data. That could solve a good portion of their needs, and some level of portfolio management for the rest.”
Mr. Stang says portfolio management is used in varying degrees of sophistication across different industries, and most IT departments in a Gartner survey that do not have a PPM system in place rated their efficiency in performing portfolio management only average or below-average. It isn't that project management methods or tools aren't up to the task, says Joel Capperella, market manager for Primavera Systems Inc., a Bala Cynwyd, Pa., USA-based project-management software vendor. The problem is education. “The biggest thing that has to be communicated is that this discipline is not difficult,” he says. “But it's like a dirty word in the business world.”
The Rise of the PMO
→ Few things may have done more to advance the cause of IT project management than the success of project management offices, which often begin in IT departments. “Many times, IT has been the driver for project management within the company,” says Kent Hamblen, chair of PMI's Information Systems Specific Interest Group (ISSIG) and a project manager in the IT PMO at BellSouth, Birmingham, Ala., USA. But Hamblen also says that many PMOs act merely as “centers of excellence,” with little direct involvement outside of IT. “They're just guiding and leaving it to each of the departments to provide their own project management,” he says.
TRUE GOVERNANCE REQUIRES MONITORING AND EVALUATING IT INVESTMENTS ACROSS THEIR ENTIRE LIFE CYCLES, NOT JUST AT IMPLEMENTATION.
Vice President of Marketing, Pacific Edge Software, Bellevue, Wash., USA
A strong PMO also can help spread project management discipline not only to other departments, but outside to the vendors and consultants who make up what is sometimes called the extended enterprise. “All the companies we do business with are required to have strong project management technologies and methods,” Mr. Hamblen says.
PMOs also lay the groundwork for portfolio management. “Many of the organizations that are successful in their portfolio management already have a project management office set up,” Mr. Stang says. Conversely, companies that want to implement portfolio management as a process and a tool set simultaneously may be forced into a slow, incremental deployment that may carry more risk of failure if they lack a PMO. “Organizations are just not set up to support all the process that might be introduced for the first time via portfolio management tool deployment,” he says. “But with a PMO, it appears to be more a matter of automating an existing, proven process that's already in place.”
GREATEST IT NEEDS
The Ability to Say, “No.” IT is prone to honoring every request for services. But armed with resource and budget statistics, it can persuade non-IT departments to make wiser use of it.
High-Quality Project Planning. Not enough IT managers know how to do it well.
Fully Integrated Capacity and Resource Planning. Despite software tools designed to support it, an integrated view still eludes many organizations.
Better Change Management. Many departments aren't yet flexible enough to meet the rapid-fire demands of today's “agile” project management.
Broader Adoption Project disciplines have yet to become a standard part of many organizational cultures.
High-Level Sponsorship. Like project managers in other industries, IT specialists still fight to convince their customers—both internal and external—of the value of project management.
At about the same time that PMOs were taking off in the late 1990s, another emerging industry trend called professional services automation (PSA) had a major impact on IT project management. Vendors such as Changepoint, Niku, Novient, Oracle, PeopleSoft and Portera began to market PSA software suites designed to assist professional services firms, such as law firms and IT consultants, whose work tended to divide neatly into projects performed for clients. Another driver: the explosion in service-based dot-coms that offered so many new products that they needed to get a better handle on their fast-growing personnel “benches,” Mr. Capperella says. By offering tools for tracking billable time and other key resource indicators and scheduling client projects, PSA vendors could say to dot-coms, “You're spending all this money, you had better decide what you're going to do first,” he says. Most portfolio vendors continue to sell software customized for PSA.
New Governance Initiatives
Nowadays, portfolio management and other project management tools and methods often are pitched as elixirs for achieving “IT governance,” which fundamentally is oriented toward helping IT departments run like businesses, according to Bill Yaman, vice president of marketing at Pacific Edge Software, Bellevue, Wash., USA. True governance requires monitoring and evaluating IT investments across their entire life cycles, not just at implementation, asserts Mr. Yaman. In most organizations, CIOs have a tendency to focus on their grand visions for IT, while they and other managers lack answers even to such basic questions as what the projects are and who is working on them. To get that information, organizations must first inventory projects and assess their alignment with the business before moving to more comprehensive portfolio management, Mr. Yaman says.
→ In the past several years, the United States federal government implemented mandates requiring departments to justify their IT expenditures by aligning them with top-level business goals to avoid wasteful duplication. Portfolio management software has proved to be the tool of choice, and government investment in the technology has encouraged corporations to employ similar methods—especially those with significant government sales. In response, some portfolio tools recently have added modules expressly for preparing business cases to present to upper management, complete with the requisite government forms and spreadsheets. “The fed is saying you have to implement your business case, and if it's a $5 million-plus project, you have to show performance,” Mr. Capperella says.
These observers also say earned value management (EVM), currently a hot topic in IT project management, is largely driven by U.S. government mandates requiring it. IT project managers are increasingly using EVM to gauge project performance, Mr. Capperella says. “Earned values tells you it cost $400 to do $200 worth of work. It's going to show you how you're performing and how you're going to project out into the future.”
Besides portfolio management, networked collaboration tools—Web portals, messaging and groupware—are arguably the biggest technology trend to hit IT project management. But while online collaboration has become standard equipment for software projects, it is apparently not living up to vendor hype in other parts of IT. Mr. Hamblen says that while his internal and external customers could benefit from increased use of collaborative tools, few have made them a normal part of their everyday operations. Nonetheless, improved team collaboration remains critical to the success of IT project management. “You have to make it easier for the people on the team to report their progress,” Mr. Capperella says.
Rapid application development methods such as “agile” or “extreme” programming are creeping into other IT realms. “In the planning and change management processes, having robust, stable and at the same time agile plans that survive ongoing change is a major challenge,” says Alexandre Rodrigues, CEng, Ph.D., PMP, a partner with Threon Group and chair of the PMI Portugal Chapter. “Without a plan that can live throughout the life-cycle and that provides a real view into the future, most of the project management processes will fail to deliver.”
Armed with numbers that can show executives the total picture of IT projects and committed resources, IT departments now are better equipped to succeed not only by managing themselves better, but by setting realistic performance expectations for others in the organization. The bigger issue, Mr. Yaman says, is that his IT customers struggle with an inability to say no, but with improved project visibility, they could provide executives with a view of the department's actual resource capacity. Then, IT “can have that strong conversation with the business side,” he says.
The Bottom Line
Formal studies are hard to come by, but the anecdotal evidence that project management has increased success in IT is convincing and abundant. Software vendors such as Primavera say they provide potential customers with return on investment (ROI) calculators that quickly show the savings from, for example, eliminating projects that are bleeding money. But the benefits also may come in quality improvements and risk reduction. “At BellSouth, we're turning out more code and good code in shorter time frames,” Mr. Hamblen says.
Perhaps by driving IT to align itself with business goals, project management tools and methods are helping IT to improve the very businesses they serve. Mr. Hamblen cautions that in the typical company, barely 20 percent of IT spending is directed toward major strategic investments. The rest is spent supporting more mundane, “keep the lights on” activities. More hopefully, he has seen companies use portfolio management to boost IT's strategic role within their organizations. Thus, in a way, IT may be using its own inventiveness to save itself. PM
David E. Essex is a freelance journalist specializing in information technology. A former editor at BYTE magazine, he has also written for PC World and MIT's TechnologyReview.com and is a regular contributor to PM Network.
PM NETWORK ❘ OCTOBER 2005 ❘ WWW.PMI.ORG